I.- Legal news

1.- Regulations for the application of the organic law decree to strengthen the family economy.

Source: Decree 876 (Fourth Supplement of the Official Registry 401, 21-IX-2023)

The President of the Republic of Ecuador, through Decree 876, issued the Regulations for the application of the organic decree law for the strengthening of the family economy, by which some reforms were made to the Regulations for the Application of the Tax Regime Law Internal. Next, we will point out the most relevant aspects:

• It is established that losses generated by the occasional transfer of real estate will not be deductible, unless these operations have generated exempt profits. In addition, the deduction of losses in the transfer of financial assets corresponding to commercial loans or portfolio negotiated with related parties is limited, imposing a limit on the discount rate.
• Article 34 of the regulations is replaced, which is related to the reduction of the Income Tax imposed on natural persons. These reforms detail the personal expenses that can be considered to calculate the tax reduction, such as housing, health, food, clothing, tourism and education, including concepts of art and culture. Conditions and limitations are also established for the deduction of these expenses, as well as the inclusion of pets and the consideration of family responsibilities. In addition, it is specified how to calculate the discount for the Special Regime of the Province of Galapagos .
• Conditions and tax benefits are established for companies that reinvest their profits in sports, cultural, responsible scientific research or technological development projects. These companies can obtain an income tax reduction of 8% or 10% on the amount of the reinvestment, depending on whether the projects are classified as priority by governing entities. The requirements are detailed, including the project execution period and their qualification .
• The way to carry out withholding at source for workers’ Income Tax is established. The calculation of the monthly withholding is described, which is based on the projected salaries for the financial year and considers deductions allowed by law, such as the projection of personal expenses. It is also specified that taxpayers who work under a dependency relationship must present a projection of personal expenses to their employers in the month of February of each year.
• It is established that taxpayers can remain in the RIMPE as long as they meet the conditions to do so, but their stay cannot be longer than three consecutive annual fiscal periods. Once this limit is reached, they must be incorporated into the general tax regime or other applicable regimes according to current tax regulations. It clarifies how the holding period is counted and when a fiscal year is considered complete. It is also mentioned that taxpayers considered as “popular businesses” in the RIMPE will remain under this regime as long as they comply with the corresponding provisions.
• Article 8 deals with the registration of new taxpayers in the RIMPE at the time of their registration in the Single Taxpayer Registry (RUC). If it is determined that a taxpayer does not meet the conditions to be in the RIMPE according to the information provided in their registration, they will be assigned the regime corresponding to their economic activity.
• Article 9 addresses the resumption of activities for natural persons subject to RIMPE. If they have suspended their RUC and resume their activities within the same fiscal year, they will remain in the RIMPE. This also applies when the suspension of the RUC is ex officio by the Tax Administration. However, if the resumption of activities occurs in a different fiscal year than the suspension, the taxpayer will no longer be able to belong to the RIMPE and will be assigned to the corresponding regime according to their economic activity.
• Article 10 eliminates article 220.
• Article 11 establishes how taxpayers will be registered in the RIMPE at the time of registration in the RUC or by updating it . The Internal Revenue Service has the authority to include, recategorize or exclude taxpayers from the RIMPE at any time during the fiscal year, notifying the taxpayer in the event of an official update. In addition, it is mentioned that if a popular RIMPE business obtains income greater than USD 20,000 during the fiscal year, it must update its RUC and change its tax regime, taxing its sales with a 12% VAT rate.

Click to read the complete regulations.

2.- Decree law of economic urgency to create the redeemable tax on non-returnable plastic bottles.

Source: Decree 877 (Fifth Supplement to the Official Registry 401, 21-IX-2023)

President Guillermo Lasso, after the Constitutional Court of Ecuador issued a favorable opinion on the draft Decree-Law of Economic Urgency for the Creation of the Redeemable Tax on Non-Returnable Plastic Bottles through opinion 5-23-UE/23 of 19 September 2023, issued Decree 877 containing these legal regulations.

The Decree-Law of Economic Urgency for the Creation of the Redeemable Tax on Non-Returnable Plastic Bottles has as its primary objective to address the problem of environmental pollution and promote inclusive recycling practices, especially in the field of non-returnable PET plastic bottles used. to package drinks. Below is a concise summary of its key provisions:

• The decree aims to reduce environmental pollution and encourage the reuse of non-returnable PET plastic bottles after use, as well as promote recycling in a circular economy context.
• This decree applies to all companies and natural persons involved in the import, production or marketing of non-returnable PET plastic bottles for packaging beverages in the national territory. It also affects bottling and recycling companies that work with these materials.
• The tax is generated by bottling beverages in non-returnable PET plastic bottles containing alcoholic, non-alcoholic, carbonated, non-carbonated beverages and water. In the case of beverages imported under the consumption regime, the tax is applied at the time of customs clearance .
• The State is the active subject of the tax, and its administration falls on the Internal Revenue Service. Bottlers and those who import beverages in taxed non-returnable PET bottles are the taxable persons.
• The tax base is the number of units bottled or imported, and the rate is two US cents for each non-returnable PET bottle taxed. The tax is fully returned to certified transformer recyclers.
• Non-returnable PET plastic bottles used to package dairy products and medicines under the consumer regime are excluded from paying this tax.
• Taxable persons must declare taxable transactions and settle the tax within the deadlines and forms established by the Regulations. In the case of imports, payment is made before the goods are dispatched.
• The tax is not deductible as an expense in the settlement of income tax due to its specific nature.
• The Tax Administration has the power to determine and sanction in compliance with current tax regulations.

This decree seeks to promote environmental responsibility and the sustainable management of plastic waste, while contributing to the circular economy and the reduction of environmental pollution.

Click to read the complete regulations.

II.- New article in our blog

Ambiguous clauses in insurance contracts

The article “Ambiguous clauses in insurance contracts” by Attorney Miguel Ángel Saltos addresses a crucial issue in the world of insurance claims and contract law. It begins with a real case where a ship insurance policy presents ambiguity in the clauses related to maintenance. The discrepancy between general and particular conditions generates uncertainty about the maintenance periodicity. This raises the fundamental question of when mandatory maintenance should be performed.

Click to read the full article.

Contact information: 

Abg. Miguel Ángel Saltos | Email: miguel.saltos@lince-saltos.com | Telephone: (+593 4) 2630313